Forefront Of Efficiency Based On Dea-funded Commercial Banks

Chinese commercial banks would be in the face of direct competition from foreign banking institutions with the full liberalization of China's banking sector, while efficiency is the key factor affecting the competitive advantage of a commercial bank. In order to improve competitiveness of domestic commercial banks, Chinese government has accelerated the reform pace of banking system since 2003. Through actively promoting reforms such as joint-stock reform, improving operational mechanism, introducing foreign strategic investors, strengthening risk management and restructuring measures, Chinese commercial banks have made rapid development. In this context, the efficiency of domestic commercial banks becomes a hot research issue.By using data envelopment analysis, this paper empirically tests the efficiency changes of Chinese three types of commercial banks from 2002 to 2008. The results indicate that the efficiencies of domestic commercial banks increase in recent years; but there have been the phenomenon of efficiency declining in 2007 and 2008. Allocative efficiency is the lowest in various efficiency indicators, so commercial banks should focus on improving resource allocation capabilities. The promotion of efficiency mainly due to the improvement of bank management level, while the technology and innovation capability should be further improved. The regression results show that the efficiency of commercial banks is closely relative to China's rapid economic development; state-owned commercial banks still have significantly lower efficiency than joint-stock and city commercial banks; accounting for assets, equity ratio, the proportion of intermediary business revenue and non-performing loan ratio have significant impact on efficiency of commercial banks; while the affect of return on average assets is not significantly; for the role of foreign strategic investors, it still needs further empirical test. Finally, based on the above analysis, this paper proposes approaches to further improve the efficiency of domestic commercial banks.